Charlie Bilello on Nvidia's overvaluation; It took Berkshire Hathaway 95 years to reach a $1 trillion market cap; Argentina is rebounding; Meeting a longtime reader at the U.S. Open
1) I'm far from alone with my skepticism on Nvidia (NVDA) recently...
One of my favorite bloggers, Creative Planning's Charlie Bilello, is also cautious on NVDA shares, given their rich valuation and the company's enormous market cap.
This data he compiled of the recent market-cap-per-employee of Nvidia compared to other leading companies floored me... I would have guessed 2 times that of Netflix (NFLX) and Apple (AAPL), not 4 times. Here's a post on X Bilello shared last week of the breakdown:
And in the latest edition of his excellent Week in Charts blog yesterday, Bilello also showed that Nvidia's revenue growth rate is decelerating:
In this next chart, he also showed that Nvidia's stock price has exceeded revenue growth by a wide margin the past two years, five of the past six years, and 10 of the last 12 years:
Lastly, as Bilello showed in this next chart, Nvidia's margins ticked down a bit last quarter – the first decline in two years:
To be sure, Nvidia is a great company with a bright future...
But given its size – more than $120 billion in run-rate annual revenue and a $2.6 trillion market cap (even after yesterday's big drop) – and valuation – more than 22 times run-rate revenue (not earnings) – it would take unprecedented (and unlikely) performance for the stock to be a good investment at these levels.
As I said in Thursday's e-mail, "this is the kind of stock I like to pound the table on when it's down at least 50% (if not 75%)."
2) With Warren Buffett's Berkshire Hathaway (BRK-B) recently surpassing a $1 trillion market cap (which I also discussed in Thursday's e-mail), it's interesting to see how many years after going public it took other trillion-dollar companies to reach that notable mark.
I came across this graphic from Visual Capitalist from last week with a breakdown:
I'll note that for Berkshire, the company didn't first go public in 1980 – rather, that's when it started trading on the New York Stock Exchange.
An older entity of it – Berkshire Fine Spinning Associates, which didn't change its name to Berkshire Hathaway until 1955 when it merged with Hathaway Manufacturing – went public in 1929 at $40 per share and soon traded down to as little as $0.50 per share during the Great Depression.
Berkshire was still trading below $8 per share when Buffett started buying shares in 1962.
So going back to 1929, it took Berkshire 95 years, not 44, to reach a $1 trillion market cap!
3) I've been to Argentina twice in recent years...
It's a beautiful country with wonderful people, so I'm glad to see it appears to be on the rebound thanks to its new president, Javier Milei, tackling the long-standing socialism that has brought the country to ruin.
He took office last December, when the monthly inflation rate was 25.5%, and has quickly brought it back under control, as you can see in this chart from Trading Economics of Argentina's month-over-month inflation rate:
As a result, based on global equity exchange-traded funds ("ETFs") Argentina's stock market has been the best performing in the world this year – as you can see in this table from Bilello's Week in Charts post last week:
(I also noticed that Brazil and Mexico were the worst performing in the world. If I were an international investor, I would be looking for bargains in those two countries...)
Lastly, here's a fascinating thread on X on Argentina's history and decline – it was one of the five richest countries in the world as recently at the end of World War II:
4) My family's annual "Labor Day weekend at the U.S. Open" tradition didn't disappoint...
My parents came down from New Hampshire (the upper left picture in the collage below) and my cousin flew in from San Francisco (the lower left picture, with my oldest daughter) for the tournament.
We saw some great matches, plus there were three special bonuses...
I met one of my longtime readers, Larry C. (in the pink shirt next to me in the upper right picture below) and up-and-coming American tennis player Brandon Nakashima's mother (in the pink on the right in that same picture).
We also stayed until 2:35 a.m. on Friday night to the end of the clash between Alexander Zverev and Tomas Martin Etcheverry, the second-latest-ending match in Open history. A little before 2 a.m., they let the few remaining die-hard fans into the lower level to watch the last set, so I got a front-row seat (the lower right picture below).
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.